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Globalization, Democracy and Economic Growth in Developing Countries: A Panel Causality Analysis

Author

Listed:
  • Samia Nasreen

    (Government College for Women University, Faisalabad, Pakistan.)

  • Muhammad Shahbaz

    (COMSATS Institute of Information Technology, Pakistan.Author-Name: Rashid Sbia
    Free University of Brussels, Belgium.)

Abstract

Purpose: This paper investigates the relationship between globalization, democracy and economic growth of 52 developing countries. Methodology: For this purpose, we have applied fully modified OLS (FMOLS), pooled mean group (PMG) cointegration techniques and the VECM method to a non-stationary heterogeneous dynamic panel over the period 1980-2010. For empirical analysis, we have used the composite indicator of globalization and two different indicators of democracy. We also highlighted the importance of simultaneous adoption of democracy and globalization for developing countries. Findings: The empirical results strongly support the long-run relationship between economic growth, democracy and globalization. The VECM Granger causality analysis reveals the evidence of bidirectional causality between economic growth and globalization. Causal relationship between democracy and economic growth depends on the indicators used to measure democracy. The results further explain that globalization adds in economic growth and democracy impedes economic growth. Recommendations: This suggests that negative impact of democracy on economic growth can be minimized by improving organizational structure of democratic institution in developing countries.

Suggested Citation

  • Samia Nasreen & Muhammad Shahbaz, 2016. "Globalization, Democracy and Economic Growth in Developing Countries: A Panel Causality Analysis," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 4(9), pages 465-482, September.
    • Handle: RePEc:ijr:journl:v:4:y:2016:i:9:p:465-482
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    More about this item

    Keywords

    Globalization; Democracy; Economic Growth;
    All these keywords.

    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook

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